Early Keytruda Results Win Merck An Upgrade

Merck & Co., Inc. MRK announced encouraging data Tuesday from a key study of patients with lung cancer. The combination of Merck's blockbuster drug Keytruda and two chemotherapy medicines helped patients live longer and played a role in stopping the disease from advancing.

The Analyst

SunTrust Robinson Humphrey's John Boris upgraded Merck's stock rating from Hold to Buy with a price target boosted from $54 to $72.

The Thesis

Merck was expected to report positive data, but the readout may have surprised investors, as it came "much earlier" than expected, Boris said in the upgrade note. (See the analyst's track record here.) 

The "significantly longer [overall survival and progression-free survival]" readout should give the company the ability to sustain its first-mover advantage in the space, the analyst said. 

The objective response rate in the Keytruda study was almost double that of chemotherapy alone, Boris said. 

The median progression-free survival rate showed "a significant improvement," and about 75 percent of patients in the chemo segment who discontinued treatment then crossed over to the Keytruda and chemo combination, he said. 

Price Action

Shares of Merck were trading higher by nearly 7 percent at the time of publication. 

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